So Much To Celebrate In This Festive Season
Evidently, the Indian consumer is unfazed by the gloomy pictures painted by commentators. Policy paralysis and governance gap are trendy phrases to use, but not much more than just that.
Consider that listed Indian companies grew their top-line by an impressive 28% in the quarter ended September 2011 after a 27% growth in the previous quarter. This is a stellar performance by any standard. Companies have not seen this kind of growth since before the 2008 global crisis.
Personal loans as of August 2011 were more than 15% higher than they were a year ago. Most of these are loans for housing. Salaries, on average, grew by more than 17%, the rains were above average and not below average as predicted by the India Meteorological Department, kharif sowing was up by 3.1% this year and reservoir levels are 15% higher than last year. The agriculture sector is therefore expected to do well for a second consecutive year.
Freight movement on the railways, cargo traffic in ports and passenger traffic in airports are all growing much faster this year than they did last year.
Clearly, India is on a roll. So, then, what about high inflation and high interest rates? Partly, high inflation rates reflect high commodity prices globally and partly they reflect the greater demand we have for better quality foods. So, prices of milk, meat, fruits and vegetables have been the major sources of inflation. Inflation in their prices has been in double digits, while that in foodgrain prices has been in the range of 2-3%. Households are headed towards improving the quality of their living and they are willing to pay for this.
Seven consecutive years of high growth have increased employment and wage rates. Savings rates are high and savings options are too risky. An improvement in the quality of life through higher consumption is therefore a logical and attractive option.
The persistent hike in interest rates has not hurt consumers enough to dent their zest to live better. Consumerism is not highly geared in India. Less than 12% of households borrow.
Indians have the money and are willing to spend. And they demand a better society – less corrupt and more civil, possibly better engaged in the creation of a better tomorrow. I don’t mean demands of the Anna Hazare type. I refer to the demand of schoolchildren who tell their parents to not burst crackers. Happy Diwali.
The writer is managing director, Centre for Monitoring Indian Economy.
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